America’s New Cold War

In the late 1980s, when it was apparent the Soviet Union was on its last legs, Colin Powell was Ronald Reagan’s national security adviser. One day, he found himself sitting at a table in the Kremlin across from the last Soviet leader, Mikhail Gorbachev.

‘Ah, General, I’m so sorry,‘ said Gorbachev, ‘you’ll have to find a new enemy.‘

Or that’s how Powell remembered it during an interview last year.

‘We lost our best enemy,‘ he said. ‘Our whole structure depended on there being a Soviet Union that might attack us.‘

Powell’s candid admission spotlights something we’ve said going back to at least our book Empire of Debt: Washington’s empire operates on a logic all its own. It’s best if you shape your investments accordingly…

Taking Aim at ‘America’s Default Adversary’

The year 2013 is ending much the way we described it at the start: China and Japan holding a urination match over some tiny uninhabited islands – with the United States in the, um, line of fire.

Chinese and Japanese fighter jets are buzzing each other’s territory. Chinese and Japanese leaders are spewing indignant rhetoric.

Fortunately for the lives of those soldiers who have sworn to uphold their leaders’ promises to engage, that’s all it’s amounted to. But as we said to our paid-up readers in January and again in early October, the threat of hot war is ever-present. And the United States is obligated by treaty to side with Japan.

As for a ‘new enemy’, it took more than 20 years of stumbling about for Washington to find a suitable one. Saddam Hussein was a placeholder for a while. There was also the amorphous ‘terror’, which is no longer deemed worthy of a ‘war on’, but merely designated as ‘overseas contingency operations’.

Enter China: ‘Since the disappearance of the Soviet Union,‘ writes James Dobbins at RAND Corp., ‘China has become America’s default adversary, the power against which the United States measures itself militarily, at least when there is no more proximate enemy in sight.‘

Thus is the United states ‘the most intrusive outside actor in China’s internal affairs,‘ writes Andrew Nathan and Andrew Scobell in Foreign Affairs, ‘the guarantor of the status quo in Taiwan, the largest naval presence in the East China and South China seas, the formal or informal military ally of many of China’s neighbors and the primary framer and defender of existing international legal regimes.‘

And that’s with ‘the pivot’ barely underway. In November 2011, when Hillary Clinton was still secretary of state, she declared, ‘The United States stands at a pivot point‘ – withdrawing troops from Iraq and Afghanistan and shifting attention to East Asia. The DC wonk class has spoken of ‘the pivot’ ever since.

Two years on, we daresay history might well look upon this moment as the formal declaration of a new Cold War.

According to former CNN journalist Mike Chinoy, the pivot entails the Navy locating ‘60% of its assets‘ in the Pacific Ocean. ‘It will involve deploying six aircraft carriers, destroyers, littoral combat ships, submarines and an increase in military exercises and port visits.‘

Nor does it end there. ‘One means of improving the prospects for direct defense and reducing the risk of escalation,‘ writes RAND’s Dobbins, ‘is for the United States to enable the capabilities and buttress the resolve of China’s neighbors.‘

‘Such a strategy,‘ he adds, ‘should not be – or be seen – as a U.S. attempt to encircle or align the region against China, lest it produce greater Chinese hostility.‘

Too late: No sooner did Clinton declare the pivot than the Center for Strategic International Studies forecast ‘a shift in Chinese foreign policy based on the new leadership’s judgment that it must respond to a U.S. strategy that seeks to prevent China’s re-emergence as a great power.‘

A Spark for Nuclear War?

‘Buttressing the resolve‘ of China’s neighbors is only the beginning of U.S. strategy, however. The Pentagon has formulated a strategy called Air-Sea Battle (ASB).

The aim is to sprinkle so many bases and airstrips around the region that China would be too hemmed in to safely attack if conflict broke out.

‘Stealthy American bombers and submarines would knock out China’s long-range surveillance radar and precision missile systems located deep inside the country,‘ reads a Washington Post scenario. ‘The initial ‘blinding campaign’ would be followed by a larger air and naval assault.‘

Could such a strategy backfire? ‘Some Asia analysts worry that conventional strikes aimed at China could spark a nuclear war,‘ the Post goes on. Other critics ‘see a dangerous tendency toward alarmism that is exaggerating the China threat to drive up defense spending.‘

The Pentagon insists ASB – and the pivot in general – is not aimed at China. For the moment, the Chinese are playing along with the pretense. After a meeting with Defense Secretary Chuck Hagel in August, China’s defense minister, Gen. Chang Wanquan, said, ‘China is a peace-loving nation. And we hope that [America’s] strategy does not target a specific country in the region.‘

The reality is rather different. ‘China will be much more discreet throughout the entire region because U.S. power is already there, it’s visible,‘ says Anthony Cordesman from the Center for Strategic and International Studies. ‘You’re not talking theory. You’re already there in practice… As part of this rebalancing to the Pacific, you have to show people it’s real at a time when so much of U.S. power is increasingly questioned by our budget debates.‘

And indeed, the effort can be made without spending (much) more money. ‘We’re not gonna build any more bases in the Pacific,‘ says Gen. Herbert ‘Hawk’ Carlisle, commander of all US Air Force resources in the region. But existing bases will be expanded and abandoned bases will be reopened – including the airstrip on the island of Tinian where the Enola Gay took off with its atomic payload destined for Hiroshima.

Indeed, the very notion makes Gen. Carlisle almost misty-eyed with nostalgia. ‘Back in the late, great days of the Cold War, we had a thing called Checkered Flag: We rotated almost every CONUS [Continental United States] unit to Europe. Every two years, every unit would go and work out of a collateral operating base in Europe. We’re turning to that in the Pacific.‘

Happy days are here again!

East Asia isn’t the only theatre where the US government aims to checkmate China. Let’s nervously turn our gaze to Africa – where we’ve been watching a nascent conflict building for the last two years.

‘Washington’s Obsession in Africa and Beyond’

The United States recently deployed ‘200 Marines to a naval base in Sicily for possible operations in Libya,‘ according to UPI – one move among many to set up ‘a network of bases in Italy as launchpads for military interventions in Africa and the Mideast.‘

‘With the United States military out of Iraq and pulling out of Afghanistan,‘ says The New York Times, ‘the Army is looking for new missions around the world. ‘As we reduce the rotational requirement to combat areas, we can use these forces to great effect in Africa,’ Gen. David M. Rodriguez, the head of the Africa Command, told Congress this year.‘

In December 2006, President Bush authorized the formation of AFRICOM – a new US military command with oversight for Africa. The decision came one month after China hosted the leaders of 48 African nations in Beijing to discuss economic issues – especially access to energy and minerals.

So what Bush began, Obama continues. Obama’s one-time foreign policy mentor Zbigniew Brzezinski describes the stakes in a recent book with a title that manages to be at once ambitious and prosaic – Strategic Vision. ‘China-Africa trade grew 1,000%, from $10 billion in 2000 to $107 billion in 2008,‘ he writes.

No wonder Reuters reported last summer that ‘with some 4,000-5,000 personnel on the ground at any given time, the United States now has more troops in Africa than at any point since its Somalia intervention two decades ago.‘

The wire service was refreshingly upfront in citing US motives – both the stated one of countering al-Qaida and other militant groups, and the unstated one of ‘winning influence in a continent where China has surpassed the United States as the No.1 trade partner and has huge mining, energy and infrastructure investments.‘

‘Africa is China’s success story,‘ writes the veteran foreign correspondent John Pilger in The Guardian. ‘Where the Americans bring drones, the Chinese build roads, bridges and dams. What the Chinese want is resources, especially fossil fuels. NATO’s bombing of Libya drove out 30,000 Chinese oil industry workers‘ – and opened the way for al-Qaida’s presence in northern Africa, we might add.

‘More than jihadism or Iran,‘ concludes Mr. Pilger, ‘China is Washington’s obsession in Africa and beyond.‘

The Middle East’s New Best Friend

And even as the United States ‘pivots’ away from the Middle East, China tries to make inroads there. Chinese trade with the region has grown to $222 billion a year – 12 times its level a decade ago. That’s more than US trade with the Middle East – $193 billion.

As in Africa, infrastructure investments figure big: Cosco, the giant Chinese port operator, owns a part of the Port Said container terminal in Egypt. Chinese firms are building railroads in Saudi Arabia, Turkey and Israel. Longer term, the Chinese might even recreate the old Silk Road, laying rail from Turkey through central Asia to China.

Then there are the arms sales – mostly small arms to the likes of Egypt, Jordan, Lebanon and Qatar. But now comes word China has sold $3.4 billion of high-tech missiles to Turkey – a member of the NATO alliance along with the United States and much of Europe.

Other longtime US allies are also feeling the tug eastward. ‘I personally have close friendly relations with various Chinese leaders, current and former,‘ Jordan’s King Abdullah told Chinese media in September. ‘China plays a vital role in promoting world peace and stability and has an influential role in regional issues.‘

It’s not just the leaders who feel this way. A Pew poll in July found China viewed more favourably than the US in every Mideast nation except Israel.

The Main Theatre: ‘A Vital National Interest’?

But make no mistake: Asia is the main theatre of the brewing US-China war. The ‘security guarantees’ aren’t only for Japan.

In October, Secretary of State John Kerry met with Philippine Foreign Minister Albert del Rosario. ‘I want to emphasize the strength of our relationship,‘ said Kerry, ‘and the bilateral ties that we have that are literally unbreakable.‘ Like Japan, the Philippines are locked in a dispute with China over a handful of islands.

Washington insiders, reading between the lines of Kerry’s remarks, saw the implication that ‘the U.S. has a direct interest in resisting Chinese territorial claims in the South China Sea,‘ as the Washington Assessment and Analysis Service phrased it.

‘It is not premature,‘ the briefing adds, ‘to detect a hardening of U.S. resolve not to accept Chinese assertiveness in the region without a challenge.‘

Put it another way: Washington is bound and determined to intervene in a messy dispute over islands in the South China Sea. The spaghetti-looking lines on the map nearby represent the competing territorial claims of not only China and the Philippines, but three more nations as well. The long U-shaped line is China’s claimed domain.

It’s as if the United States were arguing with Mexico, Cuba, Jamaica and the Bahamas over some islands in the Gulf of Mexico…and China asserted a ‘vital national interest’ in the dispute, backing up that assertion with the presence of warships.

As we said above, the empire has a logic all its own. ‘America,’ writes Independent Institute foreign policy scholar Ivan Eland, ‘is now borrowing money from China to subsidize the defense of rich East Asian allies in their quest to militarily counter… well… China.‘

Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. He is also a contributor for Markets & Money

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